A SolarCity employee carries solar panels to the spot where they will be installed on the roof of a Westminster home. MICHAEL GOULDING, THE ORANGE COUNTY REGISTER

A program that encouraged thousands of California homeowners to install solar energy systems is under attack and could suffer crucial setbacks if one of the state's biggest utilities gets it way.

The reason: Utilities say their business model is suffering from residential solar installations.

The Edison Electric Institute, which lobbies on behalf of electric utilities across the nation, blames the solar energy net-metering program for harming utilities' revenue and goes so far as to compare the utilities' battle for relevance in energy distribution to the United States Postal Service's battle against private companies like FedEx.

Net energy metering is the system that allows residential and business customers that use solar energy to gain credit for extra energy produced by their solar panels as it flows back to the grid.

Power generated by consumer photovoltaic systems makes up just 1 percent of the power distributed in the state. (Wind, bio-gas and fuel-cell generation are also part of the net metering program but generate only a fraction of the power that solar does.)

Even with that small a segment, utilities across Southern California have been pushing back - saying that increased net metering is a cost to the utilities and their non-solar consumers.

In interviews with the Orange County Register, Southern California Edison officials argued that solar net metering means higher costs for the average ratepayer.

"Edison does not lose money if more customers transfer to solar power," said Gary Stern, director of marketing strategy and resource planning for Edison. "But to the extent customers moving to solar power are allowed to avoid costs that SCE still incurs on behalf of its customers, then other customers will have to pay for this subsidy."

The Utility Reform Network, a consumer group that normally is critical of Edison, agrees, saying solar customers should have to help pay for transmission and distributions costs.

"The rest of the utility's (customers) are stuck paying fixed costs for the grid and the solar customer gets to use it," said TURN staff attorney Marcel Hawiger. "Solar customers get the full retail rate for the excess solar they generate, (plus) transmission, and distribution to the grid but (they) don't pay for it. Is the value of rooftop solar generation so high as to be equal to the value of transmission and distribution on the grid?"

Businesses who install solar in Orange County consider the criticism of the current net metering system by the utilities to be a threat to their livelihood.

"The utilities are trying to kill net metering," said Lyndon Rives, CEO of the installer SolarCity. "For the first time solar is cheaper than retail fossil fuel and it's cleaner. They see the potential and it is a threat to their business model."

SolarCity says it installed 3,054 solar systems in Orange County homes last year.

Another installer, Verengo, which has offices in Anaheim and across the state, says it has installed nearly 19,000 solar systems across Orange County.

"(State regulators) understand how critical net metering is to the continuing growth of solar," said Ken Button, president of Verengo. "We doubled in size from 2011 to 2012, growing by over 500 employees."

Here's how net metering works now:

•There is a 5 percent statewide cap on net metering systems (which equates to over 5,000 megawatt), meaning the state can continue to expand in distributed solar generation until the cap is reached. California currently has about 1,400 MW of consumer-generated power returned to the grid.

•Solar customers, through net metering, sell the excess energy they generate to the utilities at a full retail rate

•And net metering is a key part of the state's 10 year, $3.3 billion rebate program, the California Solar Initiative (an incentive program launched in 2007 and overseen by the California Public Utilities Commission). The solar rebates are funded by all ratepayers except those who qualify as low-income customers.

A January 2013 study by the Vote Solar Initiative (a non-profit focused on promoting solar energy) and Crossborder Energy (a private energy conservation and management firm), found that if the structure remains as is, net metering will result in economic benefits totaling roughly $92 million for non-solar consumers across California – for Edison non-solar consumers that is roughly $53 million in benefits.

According to the study, those benefits include savings on: the purchase of conventional power, investments in transmission and distribution infrastructure, costs of managing power delivery, costs of meeting carbon and renewable requirements, and reductions in electricity lost over power lines.

Edison doesn't see it that way, which is why the CPUC is conducting its own study – the first findings will be released this month – which will shape policy on net metering in the coming years.

AB 2514, sponsored by Assemblyman Steven Bradford, D-Inglewood, a former Edison executive, required state regulators to include in the study a determination on "who benefits from, and who bears the economic burden, if any, of, the net energy metering program" and whether solar consumers are paying "the full cost of services provided to them by electrical corporations."

SolarCity blames Bradford for stacking the deck against solar companies by pushing forward AB 2514. From 2006 to 2012 Bradford received $10,200 in contributions from Edison, according to FollowtheMoney.org, a non-profit organization that collates campaign contributions at the local level in all 50 states. Bradford, who chairs the Assembly's Committee on Utilities and Commerce, has said he supports solar but wants to see more information about its costs to other consumers.

IMPACTS EXAGGERATED?

Imagine a utility claiming it loses money whenever a consumer saves energy by turning off lights, or when buying an energy efficient refrigerator, and asking to be compensated for the revenue lost.

Solar companies and advocates argue that is exactly the type of claim Edison is making in its argument against net metering,

"If you generate your own electricity that is called competition," Rives, CEO of SolarCity said. "The average company, unless you are a monopoly, has to deal with that and has to innovate and reduce costs."

Rives concedes that every system SolarCity installs turns into revenue the utility doesn't get but he countered Edison is guaranteed by state regulators a return on the revenue invested in infrastructure.

"The utilities say they are losing money basically in two ways: They aren't selling you the power that you would have otherwise bought from them," said Tom Beach, coauthor of the Vote Solar study. "And when power goes out to the grid they are paying you for that power at the full retail rate which they think is too high of a price."

The Vote Solar study found the retail price paid to solar consumers for excess power to be fair.

"The utilities are trying to exaggerate the impacts of net metering to create an issue here," Beach said. "We know they don't like net metering but I haven't seen any concrete proposals from them with how to replace it."

DISRUPTIVE THREATS?

The bane of electric utilities existence is the growth of distributed energy resources and specifically policies like net metering according to a study released by the Electric Energy Institute. Edison and its parent corporation Edison International are institute members.

The study, released in January, is focused on disruptive threats that aim to dismantle the institution of utilities across the nation, especially in states like California which lead in renewable energy resources.

The electric institute claims if the policies and incentives to use distributed energy like solar remain as they are, eventually 33 percent of the money flow in the energy market will go for residential solar and other forms of distributed energy by the year 2017.

Gary Barsley, Edison's manager of customer distributed generation programs, said net metering programs create a hidden cross-subsidy between the consumers not using solar and those who are and benefit from the program.

Essentially, solar customers don't have to pay for the infrastructure costs because they are generating their own energy from panels on the roof of their house which results in the utility having to charge non-solar customers more in order to make up for costs.

A 2011 state law requires that 33 percent of California's energy be renewable energy by 2020. Edison says it has been one of the leading "solar powered" utilities in the nation and has bought more solar energy in the past 20 years than any other utility. Edison says it will continue to add renewable energy to the grid.

But the Edison Electric Institute says the growth of consumer generation will eventually lead utilities toward the same fate as the US Postal Service and Blackberry phones.

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